1:00pm (EST)
The bulls acted as if they wanted to take the market higher this morning but the bears are still a little hungry following yesterday’s big sell-off. Desert is always good after a big meal, if you have room, and that appears to be the case as the bears continue to push towards our near-term support targets.
The drift lower has accelerated and comes after a better-than-expected Existing Home Sales number. The National Association of Realtors reported sales of previously occupied homes rose slightly last month to a seasonally adjusted annual rate of 5.36 million. This represented nearly a 3% increase from 5.22 million in December but a lot of the action came from the foreclosure market which represented nearly 40% of sales in January. Wow. This shows a lot of people are sitting on cash as all-cash transactions accounted for over 30% of home sales. Normally, all-cash sales are about 10%.
As far as the geopolitical scene, Greece is seeing a little uprising today and Libya continues to play its wild card on oil. However, it is a weak card as the country only accounts for 2% of the world’s oil supply and can easily be covered.
Despite the chaos, we remain calm as we have a few trades that have done well on the slide. Other recommendations are longer-term options into April, May and July. We have expected this pullback and remember our thoughts from Monday morning.
Thursday is a big day for earnings so we could see some strength if earnings and forecasts come in above expectations:
Before the bell: Foster Wheeler (FWLT, $35.17, down $1.09), General Motors (GM, $35.34, down $0.43), Imax (IMAX, $27.15, down $0.30) and Safeway (SWY, $21.98, down $0.30).
After the bell: Applied Materials (AMAT, $15.82, up $0.16), DreamWorks Animation SKG (DWA, $28.28, up $0.28), First Solar (FSLR, $161.81, down $2.29), Gap (GPS, $22.41, down $0.29) and Salesforce.com (CRM, $133.64, down $3.11).
The bears are closing in on our downside targets so the close should be interesting and one we will be watching. Oil is nearing $100 a barrel which is also causing some concern and is weighing on the bulls. As we head to press, the Dow is lower by 90 points to 12,122 while the S&P is off by 11 points to 1,304. The Nasdaq is down 44 points to 2,712.
We are looking for Dow 12,000; S&P 1,300; and Nasdaq 2,700 to hold. Subscribers check for the updates in the Members Area. We are locking in profits on some trades by closing half positions and we have raised some stops on other positions that are profitable.
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